HIGH LEVELS OF INDEBTEDNESS STILL ON THE RISE – MINISTER DAVIES

HIGH LEVELS OF INDEBTEDNESS STILL ON THE RISE – MINISTER DAVIES

South African consumers are still experiencing high levels of indebtedness that have left a lot with impaired credit records and difficulty accessing credit. This was said by the Minister of Trade and Industry, Dr Rob Davies at the Barclays Consumer Conference hosted today in Cape Town.

The conference focused on Consumer credit, and in particular Credit Life Insurance and the other charges that credit providers add to the loan or purchase contract.

Minister Davies said consumers are continuously lured and enticed into taking more credit through misleading adverts that prey on desperate and vulnerable poor people. He said these challenges must be confronted head on through various strategies, including the implementation of various regulatory reforms which have been identified and put in place by government.

“Research commissioned by the Department of Trade and Industry, (the dti) showed that some credit providers were not doing affordability tests, and in respect of those that were doing them, they were not done properly or consistently. In fact credit providers tended to overlook affordability tests and just extend credit based on listing information on the credit bureau,” he said.

Davies described how the state of the credit market in South Africa has seen unsecured credit`s share of the total credit granted decreased from R18.70 billion for the quarter ended December 2014 to R17.40 billion for the quarter ended March 2015. While mortgage`s share of total credit granted decreased from 36.28 billion for the quarter ended December 2014 to R31.71 billion for the quarter ended March 2015.

“There was a quarter on quarter growth of R22.33 billion (1.41%) in the value of gross debtors book for the period ended March 2015. The corresponding year on year growth was R59.90 billion (3.86%). The growth in the Mortgage`s credit book was R7.31 billion (0.87%) and R25.23 billion (3.06%) year on year. Secured grew by R5.96 billion (1.71%) for the quarter ended March 2015 and by R21.99 billion (6.63%) year on year,” added Davies.

Davies told stakeholders that the review of interest rates and fees was necessary in order to curb and address over-indebtedness. He appealed to credit providers to stop extending credit recklessly and without conducting proper Affordability tests.

The Affordability Assessment Regulations will come into effect on 14 September 2015. Minister Davies had postponed the implementation of the Regulations for a period of six (6) months with effect from the 13th of March 2015 in order to give time for the industry to align their systems.